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Venture capital investment dollars declined 12 percent in the
first quarter of 2013 from the previous quarter, and the number
of completed deals slid 15 percent, according to a report
released today by PricewaterhouseCoopers and the National Venture
Capital Association.

Venture capitalists invested a total of $5.9 billion in 863 deals
in the first quarter, compared with $6.7 billion in 1,013 deals
in the fourth quarter of 2012.

The decline is consistent with industry expectations. For the
past several years, the venture
capital industry has been raising less capital than it
invests, accounting for some of the slowdown. Less money is also
being funneled into traditionally capital-intensive sectors such
as clean tech and life sciences, especially in first-time deals.
What's more, the majority of deals are taking place in the
capital-efficient IT sector where funding
round amounts are lower, according to the report.

During the first quarter, software companies received more VC
funding than other sectors, accounting for $2.3 billion, or
nearly 40 percent, and 329 of the deals. The increase in funding
in the software space is "very pleasantly surprising" given the
drop-off in funding overall, says Tracy Lefteroff, a global
managing partner of the U.S. venture capital practice at
PricewaterhouseCoopers. This is the fourth consecutive quarter of
more than $2 billion invested in the sector.

Unlike software, several sectors tracked in the report saw
notable investment declines. The life sciences sector, which
includes biotech and medical device businesses, fell 28 percent
in dollars and 23 percent in deals. The clean tech sector, which
includes alternative energy and conservation companies, declined
35 percent in dollars and 13 percent in deals from the prior
quarter.

While overall venture capital investing has declined, it's not
necessarily a harbinger of bad news for startups. There's still
plenty of angel capital around, and historically less than 1
percent of U.S. companies have raised capital from VCs, according
to the Ewing Marion Kauffman Foundation, a Kansas City, Mo.-based
organization that seeks to advance education and
entrepreneurship.

"You're seeing more and more angels stepping up to the plate on a
percentage basis compared with venture capitalists," says
Lefteroff.

Concrete data for angel investing tends to be harder to come by,
given the private nature of many of the deals. According to the
Halo Report, a national survey of angel group investment
activity, angel investing remained stable in 2012, compared with
prior years.